Portnoy (Mouse)traps PENN on Disney Deal
Aug 9, 2023
PENN Entertainment (PENN) reported earnings Aug. 8, beating expectations on earnings per share of $0.48 vs $0.42 estimate. Sales revenue was in line with expectations, up 2.9% year over year. Shares of PENN rallied nearly 20% in after-hours trading but have come down slightly since.
The bigger news was the strategic partnership PENN inked with ESPN, owned by Disney (DIS). The partnership holds synergy as PENN/DIS dip into the sports betting markets combined with live sports coverage through ESPN. This move combines content and markets—with the PENN app relaunching as ESPN Bet in the future. Disney saw a slight rally in after-hours trading but has sold off since then, with earnings looming after the close on Aug. 9.
DraftKings (DKNG), the largest player in the U.S.-based sports betting world, dropped about 10% on the news.
But that’s not all the news…
PENN also decided to divest Barstool Sports, which it purchased just a couple of years ago for nearly $500 million to founder Dave Portnoy. Portnoy retains 100% ownership of the company, with certain restrictions including a non-compete, which would seem to keep Barstool out of the sports betting market.
Barstool and Disney (via ESPN) have had a checkered past, so the speculation Disney/ESPN pushing this divestment is highly probable. Back in 2017, Barstool partnered with ESPN for a series of shows called Barstool Van Talk—hosted by Dan Katz and PFT Commentor (portrayed by Eric Sollenberger)—the two popular podcast hosts of Pardon My Take. The show aired one episode before being canned by ESPN.
Portnoy got the bag and the company … was this the greatest retail trader-trade of all time?
The Barstool deal is the talk of Twitter.— Adam Ryan 🤝 (@AdamRy_n) August 8, 2023
The company was sold for $500M to Penn in 2020.
Three years later, Portnoy acquired 100% of the brand back for $0.
But that's not the whole truth. Here's what really happened 👇
Disney has a lot going on right now. Besides the PENN partnership it also has the looming writer’s strike, likely subscriber losses at Disney+ and CEO Bob Iger's plans to leave the company in 2026. Netflix (NFLX) has been the lone bright spot in the streaming/content world, with the likes of Paramount (PARA) and Warner Bros Discovery (WBD) trading near lows.
Disney's implied volatility sits at around 95% going into the end of the week, with an implied move of +/- $4.50 or around 5% of the current stocks price. At $87, Disney sits just off four-year lows. But they say to never fade the mouse!
Nick Battista, tastylive director of market intelligence, has a decade of trading experience. He appears Monday-Friday on Options Trading Concepts Live. On Wednesdays, he co-hosts Johnny Trades. @tradernickybat
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